TNK-BP wins $6 billion Russia gas deal in blow for Gazprom

MOSCOW

A view shows the fuel price board of a Rosneft petrol station in St.Petersburg October 23, 2012.

Reuters/Alexander Demianchuk

MOSCOW (Reuters) - Anglo-Russian oil company TNK-BP TNBP.MM is set to sign a deal to supply Russian power producer TGK-5 (TGKE.MM) with gas worth as much as $6 billion over 18 years, TGK-5 said on Tuesday, in the latest loss by Gazprom (GAZP.MM) to a rival.

Around 40 percent of Gazprom's domestic long-term contracts with industrial users are set to expire by January 1, 2013. Some experts suggest that independent suppliers are more flexible and may offer better terms than Russia's top gas producer.

TGK-5, a unit of Viktor Vekselberg's KES Holding, said it planned to sign the deal to purchase a total of some 17 billion cubic meters of gas from TNK-BP in 2013-2030. It may top it up with an extra 6.4 bcm in 2017-2030 at 3.5 percent below the state-regulated price.

The agreement is subject to approval by TGK-5 shareholders.

TNK-BP, in which Vekselberg is a shareholder, may secure another $31 billion in similar deals with two power companies also controlled by Vekselberg's KES Holding.

TNK-BP, which is being taken over by Rosneft (ROSN.MM) for $55 billion, declined to comment.

Combining these deals, Gazprom has lost contracts to supply a total of some 30 bcm until 2030. On an annual basis, the lost volumes so far account for a small share of the 280 bcm that Gazprom supplied to the domestic market last year.

Analysts from Otkritie brokerage said investors in Gazprom should not be concerned, because rival producers lack immediate spare production capacity.

Furthermore, many industrial customers "are physically linked to Gazprom fields" and unable to struck deals with other producers, they said.